Friday, 29 April 2016

Don’t
know if you picked up on this yesterday, but after the furore surrounding Ken
Livingstone’s inappropriate comments about an easily identifiable group, there
was a similarly inappropriate comment by Andy Burnham on Question Time last
night, where he told us his policy about foreigners. He said that he’d like to
introduce a law that bans an easily identifiable group of foreigners from being
able work in the UK purely on the grounds that they are foreign. Of course, he
didn’t use those words, he said it the other way round – that he wanted a law
to protect British wages so companies could not look to recruit labour at a
more competitive rate from abroad. Apart from the different choice of wording, the statements made by both men should have made the headlines as being dodgy – but, alas, we
live in a society in which that is highly unlikely to happen.

Thing Number 2 - The Minimum Wage

So, a
chap I know called John told me today that having applied for the government’s
cycle to work scheme in which he purchases a bike and accessories, and through
the salary sacrifice initiative makes savings of 42% via reduced tax and
National Insurance contributions, his application has been rejected because the
monthly deductions on this (don’t forget voluntary and beneficial) purchase
will take his earnings below the legal minimum wage, and makes him ineligible
for the scheme.

Great – another of the many minimum wage stories of lament –
the consequence of which, in this case, is that staff in his firm on 20-100k per
year could obtain the full 42% tax savings on a bike, but John who earns just
above the minimum wage cannot. You don’t have to be that bright to see what’s
wrong here. I phoned on his behalf and made what was to me the obvious
suggestion that in order that minimum wage earners don’t miss out they could
extend the 12 month payback duration to 18 months to keep them above the
earnings threshold, but they couldn’t alter it as it’s driven by central
government. Thanks central government! Thanks Chancellor!

Thing Number 3 - Hillsborough

Despite his
ill-conceived comment on Question Time, Andy Burnham covered himself in glory
this week with his part in the Hillsborough inquest. The
recent Hillsborough ‘Justice for the 96’ outcome was the end result of a
controversial process that has lasted 27 years, largely to do with the issue of
blame. Initially the police blamed the fans, but given the falsity of this
claim it was always likely that eventually, and with an impressive degree of
tenacity and perseverance, the campaigners would see the truth exposed – that,
in fact, the police were to blame, as were the Football club, and many others
involved in the organisation the of this tragic FA Cup semi-final event. The
outcome has been pleasing not just because it’s good when justice prevails, but
also because it is a lovely demonstration of how honest people working together
for a worthwhile cause can find justice in the end and see that the blame is
apportioned to the right people, which, as they knew all along, wasn’t the
fans.

Thing Number 4 - The Blame Culture

Alas,
unlike the Hillsborough campaign, quite often blame does not go to the right
people. In a society solidly riveted to the recourse of the blame culture, this
often makes for frustrating reading, particularly in the political arena. I’m
afraid to have to say that very often politicians and the media get this
backwards – that is, they go about their business in a culture in which too
many people get blamed for things that aren’t really their fault, and don’t get
blamed for things that are their fault. A lot of the things politicians do that
are their fault – like imputing price controls, over-regulating industries, and
creating artificial shortages – elicit praise and support from large swathes of
the population when really these things should be met with ignominy. On the
other hand, a lot of the things politicians get blamed for, for which the fault
ascribed to them is an exaggeration – like crime levels increasing under their
time in office, increased inequality, and increased poverty – elicit reproach
and hostility when really these things should be opined about with a more
balanced and informed view.

Tuesday, 26 April 2016

I stumbled on an article
today that claims poorer couples are more likely to divorce than richer ones.
The writer suggested a few reasons why this may likely be the case:

"Are poorer couples more likely to divorce
because money problems put pressure on their relationships? Because they don't
have access to the kind of marriage counselling available to richer couples?
There's another possibility, too — Stevenson and Isen found that
college-educated women are less likely to believe "financial security is
the main benefit of marriage." So are less-educated, potentially
lower-income women entering marriage more out of financial necessity than actual
compatibility, then facing the cruel irony that they're more likely to divorce,
leading to more financial insecurity?"

I don't see why - one
argument is that rich people may have more at stake in terms on equity, but
they equally will have financial security after the equity has been divided up.
Are those the reasons most likely? Possibly, but perhaps they need to think a
bit more deeply. Given that on average richer people tend to be the higher
earners, and higher earners tend to be people with high intelligence, it is
probable that in terms of the dating market, richer people are more saleable
commodities, and thus may end up in higher quality marriages (part of this may
need to be offset by the likelihood that such people would also fare better in
the dating world post-divorce too, so may not feel so inclined to stay in bad marriages).

Or it could be that
richer, smarter people are more discerning about choosing their beloved, particularly
as they tend to marry later in life. Perhaps richer people are better equipped
to negotiate those difficult patches in marriages than poorer people. Finally,
given that in richer couples' marriage there is a higher probability that the
women is educated, it is perhaps the case that the marriage is stronger by
virtue of the fact that both partners hold a strong position in the marital
decision-making.

The Economics of DatingThe market of dating is
like the financial market in that it consists of buyers and sellers (the prime
difference being that in the dating market buyers are also sellers and sellers
are also buyers). Such markets would only be in equilibrium with an optimal adjustment
of prices that enabled all participants to trade.

Consider saleability in terms
of A-Z, where As are the most desirable (looks, character, education,
intelligence, humour, earnings, sexual charisma, etc), Bs the second most desirable,
right down to Zs, the least desirable. Say a B comes onto the market - he or
she is going to be an 'expensive' proposition in terms of value in the buyers'
market, because many buyers will be competing for that B.

After a cleared market you
will find that, save for various exceptions, As, Bs and Cs tend to end up with
other As, Bs and Cs, and so on. This is what they call assortative mating. It
doesn't always turn out that way - but on average the probability that it will
is compelling.

Let's simplify it by just
looking at age - particularly in relation to the myth that 'men going for women
half their age' is quite widespread. The likelihood is that it isn't. For a man
to successfully couple up with someone half his age either he must have
something worth selling (often money or high intelligence), or she will
probably have not much worth buying.

Please understand these
economic terms are not to treat people as commodities - they are illustrations
for what is happening in the real world. If you're 25 and quite expensive in
the buyers' market (i.e. a good catch) you're going to be looking for someone
in your age range, unless you'll be prepared to compromise that for, say, an
older gentlemen with higher earnings or high intelligence. If you're 25 and
quite inexpensive in the buyers' market, you may settle for someone twice your
age who is slightly more of a catch than the sellers in your age range. But these are more the
exception than the rule: most people are not dating people half their age - and
those that are will be people who have become or remained expensive in the
dating market.

I read a similar report in
the Guardian about a year ago, in which the columnist postulated that the rise
of Internet dating was causing an increase in divorce and relationship
breakdown because it was now so much easier to find someone other than your
partner. While it may be true in a limited number of cases, overall it's very
likely that the opposite is true - online dating is more than likely reducing
the number of divorces and improving the quality of relationships.

Here's why. Where are you
more likely to find a job - in a city or in a small village? Obviously it's a
city because there are more vacancies in your increased search space. The
introduction of online dating is a bit like moving from a village to a city - suddenly
numerous possibilities open up as the number of prospective partners increases
and access to them also improves.

To put it in market terms,
the search costs go from low to high. People confined to jobs, dating or
trading in their local village are going to have lower quality jobs, dates and
goods because villages lack the multiplicity of choices that cities have. In a
city you can afford to be more discerning and more patient as you take your
time meeting lots of different people to find a high quality match. You are
less likely to settle for a less-than-optimum choice of partner because the
search costs are low. Thanks to the Internet, search costs just got even lower,
which increases your chances of finding a more suitable partner, thus
increasing the likelihood of a higher quality relationship and reducing the
number of divorces or break-ups.

Wednesday, 20 April 2016

A friend asked me: are
trade unions an essential part of a successful economy, or a hindrance to
progress?

Here was my response to him:

I think the importance of
unions is overstated - it is not the case that businesses wouldn't have
progressed this far without trade unions, although perhaps slightly less
quickly in terms of valuable things like workers' rights, health and safety
standards, working conditions, and so forth. Unions have done, and still do,
some good, under certain conditions, particularly with regard to working
conditions.

But I'm afraid they do an
awful lot of unintended bad too, and I have a classic real life example of this,
as my mother was once in charge of the union in her place of work (a large printing
firm). She was a formidable figure in the workplace, so I'm told (I was quite
young at the time), and is to this day a lovely, caring lady - but alas, the
stories she told me went on to horrify me, as I pointed out to her how bad the
union's actions were for the firm (consequently, the firm has now,
unsurprisingly, ceased trading).

The main error of
reasoning that beset my mother's union (and numerous other unions too) is in
mistakenly setting up a stratification between what's good for 'The bosses' and
what's good for 'The workers'. The reality is, for well run businesses, what's
good for the bosses is also good for the workers, and what's good for the
workers is also good for the bosses, because both have vested interest in the
firm's success, so should pull in the same direction*.

The story I am now going
to tell has very slight embellishments, but not in any way that changes the
moral of the story, or the kernel of facts related to the form's trajectory.
The firm had 100 machinists operating 10 printing machines. One day the bosses
looked to acquire the services of consultants to see if 100 staff was too many.
The union kicked up a fuss to the extent that pressure was put on the bosses to
withdraw that proposal. The union argued that the consultants were potentially
a threat to some of the jobs.

When I said to my mother
that if the firm could run with, say, 90 machinists, then it would be better
for everyone concerned if they let 10 workers go (even the 10 in the long run),
my mother asserted that that would be to fail to protect the jobs of the 10
workers, and that was her union's sole purposes - to stand up for the rights
and jobs of the workers.

Here's what she doesn't
understand. If her firm has 10 too many workers then it is not operating at
maximum efficiency. The 10 superfluous workers are not only not adding value,
they are costing the firm money. But what their continual employment in the
firm does is make them less competitive, which means that competing firms whose
worker to value ratio is more optimal will seize the advantage, most notably in
lower prices that they can pass on to their customers. In advantaging rival
firms, what my mother's union was doing was disadvantaging her own firm's 100 machinists,
and ultimately the whole firm too.

To add to their
imprudence, my mother's union thought it would be good to create a rule that
said temporary workers had to be offered at least one week's work if they were
needed for any length of time. I said "What about if they just needed the
temps for a day or two?". To which my mother replied "It wouldn't
matter, we'd still keep them for a week. In fact they often had quiet spells
that lasted several days with nothing to do".

I replied "Didn't it
occur to your union that they were costing the firm unnecessary money, and that
it would have been better to have scrapped the one week rule and just have
temps in for time they are needed?". "No", she said, "That
wouldn't be fair on the temps."

A few years later, my
mother's firm went out of business. I certainly wouldn't go so far as to say
that it was entirely the union that caused this - there were other factors too.
But reading above, I hope you'll be able to agree that they didn't help the
firm's finances, and spent a lot of time hindering their ability to be
competitive, even though they didn't realise the harm they were doing in
stifling efficiency.

The other danger of unions
is that they are often trying to get better pay for their employees with scant
regard for whether that sum is above the market value or not. If 90 workers
have a market worth to a firm of £3500 per week, and their union demands they
are paid £4000 per week, then in the long run it is going to be bad for
everyone at the firm. Given that employees won't often know the real market
value of their labour, it is always likely that they will distort pay levels
detrimentally.

The other intangible
effect of this is hurting other workers too. To illustrate this in simple
terms, suppose there are six groups of workers: printing machinists, retail
workers, building trade workers, clothing factory workers, agricultural workers
and steel workers. Suppose that after union coercion, the steel workers weren't
able to raise their wages, but agricultural workers raised theirs by 10%,
clothing factory workers by 15%, building trade workers by 20%, retail workers
also by 35%, and printing machinists by 50%.

Given that wage rises are
passed on in the shape of price rises for the consumers, let's see how this
benefits the groups. With the figures above there has been an average wage
increase of 21.6%, so if we assume the same for prices (the figures won't
exactly match for reasons too complex to go into here, but they'll be along
similar lines) then as you can see, the benefits go to printing machinists and the
retail workers, but building trade workers are now slightly worse off, clothing
factory workers even more so, agricultural workers worse still, and steel
workers worst off of all. Four of the six groups have been made worse off by the
aggregate wage rises, and that's not even to mention the increased unemployment
that would come from such demands for higher labour, and possible liquidations
too if firms have competition from aboard who can be more competitive.

I’m
not unsympathetic to many of the ways that union members like my friend are
good people to have around, to ensure good, harmonious and safe working
environments, because sometimes those voices apply necessary duress on bad
senior staff. However, in order to ensure there is no bad to accompany the good
work, the main thing that must be avoided at all times is distorting the
natural market value of prices – that is, the equilibrium point at which supply
is equal to demand. Prices are an incredible thing – they inform us of people’s
wants and needs. They are information-carrying, like a democracy. If the price
of oranges is more than the price of apples, it tells us all sorts of things
about the supply and demand curves of both. If prices of DVDs are low, and
getting lower, it tells us that there are newer more popular technologies on
which to watch movies. If you find it hard to locate a pay phone on the street,
it tells you that demand for them has all but vanished (even most elderly
people have a mobile phone now).

As
you probably know, a price ceiling is a form of legislation by the government
that says the price of x must not go above their ceiling price. Bear in mind
that the price of a good is nigh-on optimal if set by market forces. Therefore
if the government's price ceiling is lower than the market value, demand will
rise and supply will fall, creating a shortage. Rent controls are an example of
a price ceiling. Property investors are less likely to invest in housing, which
creates a shortage as rents can no long reach their market value.

A
price floor is a form of legislation by the government that says the price of x
must not go below their floor price. Therefore if the government's price floor
is higher than the market value, demand will drop and supply will rise,
creating a surplus. The minimum wage is an example of a price floor. Employers
are less likely to hire staff, which means an increase in unemployment. If
unions find themselves distorting the natural market clearing rate of prices,
then they are doing a lot of harm (to everyone) that is probably invisible to
them.

* If you're interested, I
wrote a nice little ice cream analogy to convey that point, in this
blog post)

Monday, 11 April 2016

Why do projects nearly
always take longer than scheduled? You know the score - you've seen it many
times before: some large firm wins the tender to undertake mass refurbishment
on a large government building, or to build a new distributor road stretching several
miles, and inevitably the project overruns and the initial budget put aside
proves inadequate to the completion of the job.

But why does this happen
so frequently? The reason is quite straightforward; it is because the estimated
time is a predictable underestimation - a phenomenon that greatly increases
with the complexity of a job. And time is, of course, money.

Writing a blog post is
quite straightforward, so if I set myself 20 minutes to write it (or less with
short blogs like this one) it isn't difficult to stick to the deadline. But
projects like big building projects, even when an up-front fee has been agreed
and the incentive is to complete it as quickly as possible, are highly likely
to overrun - quite simply because our highly consistent underestimation of time
at each stage of a project is going to be multiplied with every further stages
of the process. It is the individual probabilities of stages multiplied that is
the key to the explanation.

This is what is commonly
known as the "planning fallacy" - whereby for every step in a
project, there is around a 50% chance of that stage being completed over the
estimation time. Once you plug in the numbers, that means that for a project of
two steps there's a 50% chance multiplied by a 50% chance, which means for two
steps the chance of overrunning is now 75%. For 3 steps it's 50% * 50% * 50%,
which means there is an 87.5% chance that out of a 3 step program it is going
to overrun. Consequently, then, a project in which each constituent step has
only a 50% chance of not overrunning, means that for every step the probability
increases by x 1/2, which means that projects with multiple steps are nigh-on
certain to overrun.

Friday, 8 April 2016

In the penultimate chapter
of his book The Better Angels of Our
Nature: Why Violence Has Declined, Steven Pinker attempts to bring together
the tenuous linking of increased free market libertarianism and increased
peace:

"To think like an economist is to accept the
theory of gentle commerce from classical liberalism, which touts the
positive-sum payoffs of exchange and its knock-on benefit of expansive networks
of cooperation. That sets it in opposition to populist, nationalist, and
communist mindsets that see the world's wealth as zero-sum and infer that the
enrichment of one group must come at the expense of another."

In my case, he's pushing
at an already open door with a comment like that, but then I'm not one of the
people that needs convincing - I mean, as I've blogged about a couple of times
now, it's pretty evident if you look the nations that most espouse economic
freedom, democracy and liberalism, they are pretty much always the most
peaceable countries too.

As well as the obvious
point - that free trade is underwritten by co-operation, empathy, and a stable
rule of law that protects individual rights - what Pinker means by 'thinking like an
economist' is probably that people well versed in economics are not so heavily sullied
with the divisional myths that pervade the left; like for example, class
stratification, wanting to forcibly confiscate wealth from higher earners (the
higher the taxes the better), enviously resenting those who are successful,
failing to note when value is being created, falling for the fixed pie fallacy
and feeling a false sense of entitlement for what others have acquired,
thinking that the economy is zero-sum, lamenting when other more competitive
industries prove to be more efficient than industries in their own country, and
treating others as less important if they happen to belong to a country outside
of their own geographical borders.

The link between peace and
the free market is tenuous, but that's only because the entirety of our global
interactions, past and present, amounts to a vast nexus of tenuous and complex
correlatives. And it's not the first time that we've talked
about it.

Wednesday, 6 April 2016

Oh heck, where did it start
to go wrong again? As I'm sure you can remember, we used to be pretty repressive
when it came to personal liberties, where anything deemed too offensive for
social mores was frowned upon, contested and sometimes banned. Radio stations would
not play The Rolling Stones' Let's Spend The Night Together; the film Last
Tango In Paris caused uproar, as did Monty Python's Life of Brian. It even used
to be difficult to be openly gay, or be involved in a mixed heritage
relationship.

It's easy to look back and
recoil at past attitudes, but we did seem to get a little better. We stopped
being so intrusively upset about people's works of art, and about how they
expressed themselves, and we grew the hell up about who people had relationships
with.

But alas, recently we seem
to have gone backwards again. I can't recall precisely when - it seems to have
insidiously crept into our society, but we started to find ourselves surrounded
by spineless busybodies who get offended too easily in the absence of a rigorous
argument or any notable reasoning skills, and thought it was their right to do
so in a way that meant everyone else had to be very afraid of offending them.

And it seems they got
their wish, because what emerged from this national paranoia was an even larger
bunch of busybodies - those even worse than them: the people who get
offended on their behalf. We've become so used to seeing people afraid of
upsetting or offending other groups that it no longer surprises us when we hear
of the latest person who cannot comfortably wear their crucifix necklace at
work, or the latest group to be guilty of 'cultural appropriation*' for wearing
sombreros on a night out, or the latest university that creates ‘safe spaces’
to protect the right of some students not to be offended (heck, did they forget
that free expression, argument and debate are the essential tools for learning
and for challenging bad ideas?).

What has caused us to
journey from lily livered impotents to reasonably intrepid proponents of free expression
back to lily livered impotents again? I can think of two main changes that
might have altered the public consciousness. In the first place, the country
now has a lot more diversity, which means there are a lot more minority groups
with views that differ from the mainstream. And in the second place, computer
technology has undergone radical changes, which means there is mass
communication going on, and also that everything everyone does it pretty much
under external scrutiny now.

Personally I see no reason
why either of things should cause us to become spineless again, but it would appear
that we have. Diversity of people has generated an unprecedented range of
beliefs, opinions and cultural practices that appear to make many people
uncomfortable in expressing themselves for fear of upsetting someone, or being
labelled a racist or bigot. The widespread fear of upsetting Muslims is perhaps
the most obvious case in point. And the extent to which everyone can have their
say on social media is unprecedented too - it appears to be bringing with it a
huge rise in vile threats and guttersnipe abuse, which as a consequence appears
to be making many people fearful of free expression once again. But I've said it before on
here, and I'll say it again - we must stop this train of timidity in its tracks
as soon as possible. To finish, I want to leave you with a video doing the
rounds at the minute - of a black campus employee confronting a young white male who has his hair in dreadlocks. Alas,
this video is isn't exactly an isolated incident - hardly a day goes by without
someone asserting that how someone looks, the clothes they wear, the statue they
had erected, and so on, has suddenly become racist or simply deeply offensive
to a minority group.

What you have to ask
yourself is, what forces occurred in that young lady's life for her to so
aggressively demand that a young white man's freedom to wear his hair in
dreadlocks ought to be denied? She didn't just suddenly decide this for herself.
Who has done such a number on this (probably) otherwise bright student to cause
her to uncritically and unashamedly declare that this so inextricably belongs
to 'my culture' that it trumps any personal freedoms you might have on this
matter - was it parents, friends from the same 'culture', or was it those pervading
busybody trends I mentioned earlier, insidiously creeping back into our
society, and showing increasing signs that this is just the thin end of the
wedge? Things have got to change all over again!

Monday, 4 April 2016

With the recent introduction of the living wage the red socialist in blue conservative clothing
chancellor George Osborne made it clear once and for all that he is just as careless
about basic economics as the opposition parties, that he has scant concern for
the economic well-being of the people of this country, and that pre-Prime
Ministerial popularity is his main agenda.

The living wage price
floor is now £7.20, up from £6.70 under the old minimum wage, and within four
years it will be over £9. I have written
repeatedly about all the ways this is a terrible idea, but I have not gone
into as much depth as I'm now going to about how politicians play on this
public credulity in such a shameful way. And I'm sorry to have to be the one to
tell you, but it is shameful - it's shameful because it's driven by falsity and
conceit, and I hope after reading this you'll understand more about why this is
the case.

I lamented in a
recent Blog post about how the people that govern us make decisions of
popularity, not of prudence, based on the fact that the majority of the people
they govern prefer popular myths over prudent truths. Consequently, when you
have an electorate that is in this position it is incredibly easy to sell them
things they think are good for them but are actually not. To understand this,
we need to go over the basic economic fallacy that underpins almost all other
related fallacies - it's what Bastiat summed up in his seminal essay "That Which is Seen, and That Which is Not Seen"
- which is basically about how economic decisions have far-reaching effects
beyond the immediacy of our perceptions, and that any idea or policy has to
factor in everyone who is affected (It's what I like to call the tangible
costs, the tangible benefits, the intangible costs and the intangible benefits,
touched on in this
Blog post).

It is no exaggeration to
say that just about every bad economic idea or imprudent policy in politics is
down to the fallacy of only thinking about the immediate effects on an easily identifiable
group rather than thinking about the effects on everyone, in the immediate and
long term too. The art of a prudent policy is in tracing its consequences
everywhere, not just in one easily identifiable place (for more on that, see this
Blog post of mine). It is because the vast majority of the public only
think of policies in terms of one easily identifiable place that politicians so
readily impose these imprudent policies on us. Only when the populace wises up
will there be selection pressure on politicians to wise up too.

This State-mandated living
wage of £7.20 an hour benefits a select group of people (a proportion of low
skilled workers) but harms just about everyone else (employers, the people that
lose their jobs because their employer has to let some staff go, the consumers
who have to pay higher prices, the hundreds of thousands of people whose labour
is not worth £7.20 an hour to a prospective employer, and at a broader level,
the nation as a whole as State-mandated
price fixing makes other places more attractive places to invest).

To see why labour price
controls are always bad, we first have to understand what labour is. Labour is a
commodity - it is a substantially marketable sale of work sold to create value.
Its price is dictated by supply and demand, which involves the aggregation of
billions of choices, wants, needs and desires going on in the world at any one
time. There is no such thing as a 'fair day's pay' or a wage someone 'deserves'
or a 'just' wage - they are completely alien to a proper understanding of
economics. They are emotive terms uttered only be people who don't have a full
picture of how prices are dictated.

Who benefits from labour? The
answer is everyone. The person selling his labour, let's call him Fred,
benefits because he chose that option over the next best option. The employer
benefits too because it's that labour that helps him make a profit, as do all the
places Fred spends his money, as do all consumers generally.

How do you
know if you are of value to your employer? Easy – your value can be measured by
what’s called the marginal revenue productivity
of wages, which is basically the benefits your employer earns from employing you.
If your wages are more than your marginal
revenue productivity then you earn more than the sum total of value you bring
to your company.

On the back of that, two
things set wage levels, primarily. Firstly wage levels are determined by the
skill level of the job in terms of how easy it would be for the next person in
line to come in and do the job. A McDonald's burger flipper or a Sainsbury's
shelf stacker do not command high prices for their labour because it is easy to
replace them in the job centre queue as the job is easy. Lawyers and surgeons
command high prices for their labour because it is not easy to replace them in
the job centre queue, and their jobs require lots of studying and training.

Secondly, wage levels are
determined by which other job opportunities the worker has. Business owners are
not just competing with the goods or services they sell, they are also
competing in the labour market too. Suppose Sainsbury's has the profit-scope to
open several more stores. To do this they need to buy labour, which means
either hiring people currently unemployed, or hiring probably better people
already doing similar work. To do the latter they must offer higher wages (or
some other benefit) in order to attract these workers. So wages are set not
just by who is next in line relative to the skill level of the job, but also by
how many rival competitors want to buy your labour too. Your pay working for x
will be contingent on what y and z are willing to pay you, because x, y and z
are in competition not just for bread, milk and cereal, but for the labour upon
which their profits are based.

Osborne's
popularity-over-substance Living Wage price floor ignores all this, plus it
ignores all the harm done to small businesses, to currently unemployed people,
and all the soon to be unemployed people. Why aren't the people cheering the
Living Wage thinking of these hundreds of thousands of people - the 'unseen' in
Bastiat's equation? How come no one thinks about all the elderly people or
already struggling people that get hit in the pocket by the higher prices that
businesses introduce to pay for this? These are the people that proper economic
considerations demand that you factor in too.

The hotel workers and
waitresses and bar staff enjoying their extra £20 a week owe their gains to consumers,
including students, the elderly and unemployed people, who are forced to pay
the higher prices that fund those gains. The net gains to the winners are dwarfed
by the net costs suffered by the rest of the population (most of the businesses
affected by the Living Wage don't actually make very much profit, by the way).

If George Osborne wants a genuinely prudent
solution, why won't he do the good thing for low earners that also isn't the
bad thing for employers and consumers and the unemployed, but is somewhat less popular
- take
low earners out of tax and national insurance, thus making their wage more
like a living wage, but not increasing consumer prices and jeopardising
employment levels and penalising employers of low-skilled workers? Oh yeah,
question asked, question answered, it's somewhat less popular - and he does
want to be Prime Minister, of course.

Saturday, 2 April 2016

The people that run our
country worry me, but the people that want to run our country (Labour, the Lib
Dems, the Greens) worry me far more. Despite the fact that, apparently, China
has produced more steel in the past two years than the entire UK has since the
19th century (and wow, what a fact that is if it's true!), and the fact that
the British steel industry is losing over £1million a day as a result of the
collapse in steel prices (can they not spot the obvious supply and demand link
between the two facts?), they still want to flirt around with the idea of
nationalising British steel - not because it's the prudent thing to do (even
the most blockheaded politicians must be able to undertake this basic
arithmetic), but because it's popular with UK voters.

I wonder if any of those
calling for nationalisation of costly, failing industries ever gave a thought
to the concomitant losses in other parts of the public sector (health, social
services, defence, police officers on the beat, old age pensions, etc) required
to pay the price. Probably not.

One thing they definitely
don't give a thought to is the notion that when a business or even a whole
industry dies in the free market, it is not only a good thing in the long run,
but a necessary thing too. Not only is a death in the market a sign that others
are providing the good or service more competitively and efficiently, it is
also a necessary departure that makes room for new industries to grow. Imagine
if the companies that produced video tapes hadn't died or moved to newer
technologies, or suppose people were still trying to make a living producing
telephone boxes or designing gramophones - it is easy to see why they wouldn't
be solvent anymore.

When obsolete industries shrink
or discontinue this helps free up new capital for fresh industries. If we had
tried to artificially keep alive the video tape industry, we wouldn’t be
enjoying so quickly the improved movie watching experience of DVDs or On Demand
TV: if we had tried to artificially to keep alive the old telephone industry,
we would have slowed down the growth of the burgeoning mobile phone industry
that has seen so many other auxiliary gadgets included on our hand held devices
too.

It is just as necessary
for a healthy economy to allow providers of extraneous goods and services to
shrink or die as it is new ones to emerge. The former is essential to the
latter, as there always needs to be fresh capital freed up for new and improved
industries. Trying to artificially preserve the British steel industry over
more competitive steel production elsewhere is not very different to trying to artificially
preserve fax machines at the expense of emails - it is only a more immediate
and reactionary example of the same thing.

Alas, it is true that all
this does have a negative short-term effect on the workers in the British steel
industry, and in some cases on local communities, but artificially propping up
an industry that is being outcompeted by a more competitive industry abroad is not
the right thing to do, for all the reasons just explained (By the way, if
you're still having emotional home-grown difficulty with this point, let remind
you of a previous article I wrote for the Adam Smith Institute in which I
explain how artificially
propping up failing British industries also hurts other British industries in
the process).

The reality is, there is a
horrible and harmful co-dependency between the masses of our population - who
are so Anglo-centric that they fail to understand how competition works, and
how stifling competition harms us as well as everyone else - and the pliable
politicians that rely on their vote to survive in their roles. The people that
govern us, and the people in the shadows wanting to govern us, are toxic to our
economy, because they make decisions of popularity, not of prudence, based on
the fact that the majority of the people they govern prefer popular myths over
prudent truths. As George Orwell once famously said: "In times of universal deceit telling the truth is a revolutionary
act", and this nation badly needs a lot more truth injected into the
political mainstream.

Friday, 1 April 2016

In my view, the author and
computer scientist Ray Kurzweil is one of the most interesting people around. Kurzweil
is a bold futurist who has every confidence in the law of accelerating returns,
a phenomenon that predicts a continual exponential increase in technologies in
ways that will keep improving and enhancing human well-being. There is plenty of
evidence to suggest he is likely to be right, although for various reasons,
many of which are unpredictable, apparent exponential growth patterns can quite
easily level out, and probably will in some areas of technology.

On a more specific note, in
his book The Singularity Is Near, Kurzweil
has made a very interesting prediction: that by the year 2040 we will be able
to build the equivalent of human intelligence by scanning the brain from the
inside using nanobots. Once we know the precise physical structure and
connectivity information, Kurzweil says we will be able to produce functional
models of sub-cellular components and synapses and replicate whole brain
regions.

Kurzweil talks of
"uploading" a specific human brain with every mental process intact,
to be instantiated on a "suitably powerful computational substrate". Rather
than an instantaneous scan and conversion to digital form, Kurzweil thinks humans
will most likely experience gradual conversion as portions of their brain are
augmented with neural implants, increasing their proportion of non-biological
intelligence slowly over time. Quite how much time, he's not sure, although he offers
a suggestion of 1016 calculations per second (cps) and 1013
bits of memory, plus the possible additional detail that such uploading
requires, which could be as many as 1019 cps and 1018 bits.

This all sounds
intriguing, but for my mind there is a possible problem that underwrites the
above scenario - it doesn't seem possible to me to replicate the 'you' that you
know as your first person selfhood, and ditto that for any unique human, for
reasons I'll explain.

First, don't
get me wrong, future advancements will astound us in all sorts of ways we
cannot currently imagine, and there probably will be forms of artificial
intelligence that we can interface with at a level similar to the human-human
interface we enjoy. But I personally think that the 'you' and 'me' we each know
to be our own mind is something of such unique complexity and evolutionary
finesse that it will never be able to be precisely reconstituted in any kind of
artificial intelligence. In a nutshell, the 'you' that makes up your first
person selfhood is an utterly unique aggregation of mental machinery that can probably
only be retained in the biological apparatus that you call your brain. I will
explain why with a thought experiment.

Any time AI program
writers try and extend the world of brain cells into the world of transmitter
molecules they would then have to try and simulate hormones. And these, in
turn, depend on genetic instructions which are themselves only partially
programmed and highly adaptable. Simulating the human brain is not just about
replicating the hardware that we see in the form of neurons and synapses, it is
about replicating a lengthy evolutionary process that goes right back to the
origins of biology itself. For example, some of our genes involved in the
development of our cognition (even at the embryonic stage in the womb) are
genes that go right back to the very beginning of all life forms billion of years
ago - and these are genes and hormones that form the substrate of cognition
prior to the point at which neurons and synapses become involved.

Let us
suppose, though, that we overcame all those hurdles and developed the
scientific wherewithal to attempt brain replication in an external agent - a
computer or an android, as Kurzweil suggests. Here’s why I still think your own
‘self’ will remain unique to you. Suppose at this stage we can produce a
short-cutting algorithm that enables us to reduce the human brain atom by atom
and then reconstitute the exact atomic configurations of the original mind,
reproducing the conscious cognition. What would that entail?In the human brain there are 10^11 brain
cells (that's 100 billion), and 10^14 atoms (that’s 100 trillion) in each brain
cell - that makes 100 billion x 100 trillion atoms, which is 10^25 atoms (or 10,000,000,000,000,000,000,000,000).

Now,
suppose we were to replicate the brain at the rate of 1 trillion atoms per
second. Even at that rate it would still take us 317,097 years to reconstitute
the full brain. It sounds like all talk of reducing at the atomic level is too
far, but it shouldn't be – after all, Alzheimer's sufferers experience
degeneration atom by atom, one at a time, and babies are formed in the womb
atom by atom, so evidently these effects do impinge on physical states, they
are just processes of natural development that happen really fast.

It was once
thought that consciousness was a precise configuration of proprietary parts,
and that in assembling a brain from scratch there would come a point at which
the first person perspective of consciousness would be switched on - rather
like assembling a circuit board of cognition that lights up when all the proper
connections are made.But our
aforementioned knowledge of degenerative diseases like Alzheimer’s shows that
this isn’t the case – at least, it shows that atomic reduction can occur bit by
bit and that the cognitive abilities of that mind operate with different
degrees of composite integrity.

The problem I
see (in relation to compromising the ‘self’) is that if in our thought
experiment we reassembled a brain from scratch one trillion atoms at a time we
could not reconstitute the unique first person perspective because the first
person self would at some point become aware of cognita being partially
reconstituted, at which point (and from then on thereafter) a new set of
conceptions and experiences would be taking place during the restoration
process. So the simulated ‘you’ being uploaded would at some point begin to
take on thoughts of its own before the real you in its entirety was uploaded -
meaning that a partial you had begun to generate new and unique thoughts.

Ok, let's
speed up the process. Even if you doubt the effects of atomic reduction, and we
instead chose brain cells as our object of replication, and replicated them at
the rate of 1000 per second (a feat that would take unimaginable technological
sophistication), it would still take over 3 years to do the whole brain. In
that 3 years, such an activity is bound to cause the simulated ‘you’ to take on
thoughts of its own before the real you in its entirety was uploaded. However
much we can reduce the execution time - months, weeks, even days, it seems
impossible to replicate the unique 'you' or 'me' that make up the totality of
that first person selfhood, because during the uploading process there surely
will come a point at which the original you and the copied you each start to
develop new and unique first person cognita - cognita, in fact, that is being
caused by the experience of the replication process itself, as well as all the
interference at a neurological level.

About Me

This is the Blog of James Knight - a keen philosophical commentator on many subjects.
My primary areas of interest are: philosophy, economics, politics, mathematics, physics, biology, chemistry, theology, psychology, history, the arts and social commentary.
I also contribute articles to the Adam Smith Institute and the Institute of Economics Affairs.
Hope you enjoy this blog! Always happy to hear from old friends and new!
Email:j.knight423@btinternet.com